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Why Is Ares Capital (ARCC) Down 8.1% Since Last Earnings Report?
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It has been about a month since the last earnings report for Ares Capital (ARCC - Free Report) . Shares have lost about 8.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ares Capital due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Ares Capital Q1 Earnings Miss Estimates, Costs Decline Y/Y
Ares Capital’s first-quarter 2022 net investment income of 41 cents per share missed the Zacks Consensus Estimate of 47 cents. The bottom line, however, reflected a rise of 24.2% from the prior-year quarter.
The company recorded an increase in total investment income. The portfolio activity also remained solid in the quarter. A decline in expenses was another tailwind.
GAAP net income was $211 million or 44 cents per share compared with $373 million or 87 cents per share recorded in the prior-year quarter.
Total Investment Income Increases, Expenses Decline
Total investment income was $440 million, up 12.8% year over year. The rise was driven by an increase in dividend income, interest income from investments and other income. The top line missed the Zacks Consensus Estimate of $488.7 million.
Total expenses were $229 million, down 5% year over year.
Portfolio Activities Solid
Gross commitments worth $2 billion were made in the first quarter to new and existing portfolio companies. This compares with $1.8 billion worth of gross commitments in the prior-year quarter.
In the reported quarter, the company exited $2.6 billion of commitments compared with $2.1 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $19.5 billion as of Mar 31, 2022. The fair value of accruing debt and other income-producing securities was $17.7 billion.
Balance Sheet Strong
As of Mar 31, 2022, the company’s cash and cash equivalents totaled $695 million, up from $372 million as of Dec 31, 2021.
Ares Capital had $5.3 billion available for additional borrowings under the existing credit facilities as of Mar 31, 2022. Total outstanding debt was $10.5 billion.
As of Mar 31, 2022, total assets were $20.5 billion and stockholders’ equity was $9.4 billion.
Net asset value was $19.03 per share, up from $18.96 as of Dec 31, 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -8.51% due to these changes.
VGM Scores
At this time, Ares Capital has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ares Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Ares Capital (ARCC) Down 8.1% Since Last Earnings Report?
It has been about a month since the last earnings report for Ares Capital (ARCC - Free Report) . Shares have lost about 8.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Ares Capital due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Ares Capital Q1 Earnings Miss Estimates, Costs Decline Y/Y
Ares Capital’s first-quarter 2022 net investment income of 41 cents per share missed the Zacks Consensus Estimate of 47 cents. The bottom line, however, reflected a rise of 24.2% from the prior-year quarter.
The company recorded an increase in total investment income. The portfolio activity also remained solid in the quarter. A decline in expenses was another tailwind.
GAAP net income was $211 million or 44 cents per share compared with $373 million or 87 cents per share recorded in the prior-year quarter.
Total Investment Income Increases, Expenses Decline
Total investment income was $440 million, up 12.8% year over year. The rise was driven by an increase in dividend income, interest income from investments and other income. The top line missed the Zacks Consensus Estimate of $488.7 million.
Total expenses were $229 million, down 5% year over year.
Portfolio Activities Solid
Gross commitments worth $2 billion were made in the first quarter to new and existing portfolio companies. This compares with $1.8 billion worth of gross commitments in the prior-year quarter.
In the reported quarter, the company exited $2.6 billion of commitments compared with $2.1 billion a year ago.
The fair value of Ares Capital’s portfolio investments was $19.5 billion as of Mar 31, 2022. The fair value of accruing debt and other income-producing securities was $17.7 billion.
Balance Sheet Strong
As of Mar 31, 2022, the company’s cash and cash equivalents totaled $695 million, up from $372 million as of Dec 31, 2021.
Ares Capital had $5.3 billion available for additional borrowings under the existing credit facilities as of Mar 31, 2022. Total outstanding debt was $10.5 billion.
As of Mar 31, 2022, total assets were $20.5 billion and stockholders’ equity was $9.4 billion.
Net asset value was $19.03 per share, up from $18.96 as of Dec 31, 2021.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -8.51% due to these changes.
VGM Scores
At this time, Ares Capital has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Ares Capital has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.